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Arbitrage-free Models In Markets With Transaction Costs

Dublin Core		PKP Metadata Items	Metadata for this Document
1.	Title	Title of document	Arbitrage-free Models In Markets With Transaction Costs
2.	Creator	Author's name, affiliation, country	Hasanjan Sayit; Worcester Polytecnic Institute
2.	Creator	Author's name, affiliation, country	Frederi Viens; Purdue University
3.	Subject	Discipline(s)
3.	Subject	Keyword(s)	Financial markets, arbitrage, transaction cost, sticky process, fractional Brownian motion, time-change
3.	Subject	Subject classification	91G10, 91B25, 60G22
4.	Description	Abstract	In the paper [7], Guasoni studies financial markets which are subject to proportional transaction costs. The standard martingale framework of stochastic finance is not applicable in these markets, since the transaction costs force trading strategies to have bounded variation, while continuous- time martingale strategies have infinite transaction cost. The main question that arises out of [7] is whether it is possible to give a convenient condition to guarantee that a trading strategy has no arbitrage. Such a condition was proposed and studied in [6] and [1], the so-called stickiness property, whereby an asset's price is never certain to exit a ball within a predetermined finite time. In this paper, we define the multidimensional extension of the stickiness property, to handle arbitrage-free conditions for markets with multiple assets and proportional transaction costs. We show that this condition is sufficient for a multi-asset model to be free of arbitrage. We also show that d-dimensional fractional Brownian models are jointly sticky, and we establish a time-change result for joint stickiness.
5.	Publisher	Organizing agency, location
6.	Contributor	Sponsor(s)	NSF GRANT DMS 0907321
7.	Date	(YYYY-MM-DD)	2011-07-04
8.	Type	Status & genre	Peer-reviewed Article
8.	Type	Type
9.	Format	File format	PDF
10.	Identifier	Uniform Resource Identifier	http://ecp.ejpecp.org/article/view/1671
10.	Identifier	Digital Object Identifier	10.1214/ECP.v16-1671
11.	Source	Journal/conference title; vol., no. (year)	Electronic Communications in Probability; Vol 16
12.	Language	English=en
14.	Coverage	Geo-spatial location, chronological period, research sample (gender, age, etc.)
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